Nigel Midgley v Vossloh Cogifer UK Ltd

An Employment Tribunal errs in law where it relies decisively on part of a costs-warning letter while being unaware that the letter was sent on a without-prejudice basis. Where redactions conceal that status and the Tribunal has not considered waiver or severance, its reliance on the remaining text is inadvertent and vitiates the costs decision.

Where the letter was central to the costs order, and the Tribunal rejected almost all other alleged unreasonable conduct, the order should be quashed rather than remitted.

The claimant's substantive claims for unfair dismissal for making protected disclosures and detriment under section 47B of the Employment Rights Act 1996 had failed. The Employment Tribunal subsequently ordered him to pay the respondent's costs from 16 April 2021, capped at £10,000.

The costs decision relied on a 26 March 2021 costs-warning letter. The version placed before the Tribunal had redacted its opening and closing passages, including its without-prejudice offer to settle on withdrawal of the claims without a costs application. The claimant appealed the costs order on the ground that the Tribunal had erred in relying on that letter. His separate appeal against the substantive decision had already been dismissed at a rule 3(10) hearing.

1. Appeal allowed. The costs order was quashed.

2. The 26 March 2021 letter was central to the Tribunal's decision. It fixed the date from which costs were awarded, and the Tribunal had rejected most of the respondent's other criticisms of the claimant's conduct. Without the letter, no costs award would have been made.

3. The Tribunal saw only a redacted version. The redactions removed the passages identifying the correspondence as a without-prejudice settlement offer and explaining its purpose. The Tribunal therefore appeared not to know the nature of the document on which it relied.

4. In particular, the Tribunal had no opportunity to determine whether privilege had been waived or whether the redacted passages could properly be severed. Given its duty to an unrepresented litigant, it would have needed to explain the issue and obtain a clear position on waiver had the respondent disclosed the letter's without-prejudice character.

5. The EAT did not need to resolve the wider and potentially difficult law on without-prejudice privilege, severance or waiver. It was sufficient that the Tribunal had been drawn into an inadvertent error of law by relying on the concealed material. The error vitiated the costs decision.

6. Remittal was inappropriate. The Tribunal had relied almost wholly on the letter, and the respondent's stance indicated that further costs proceedings would not be pursued.

• Employment Appeal Tribunal: allowed the claimant's appeal and quashed the Employment Tribunal's costs order: [2024] EAT 149.
• Employment Tribunal: on 3 September 2021 ordered the unsuccessful claimant to pay the respondent's costs from 16 April 2021, limited to £10,000.
• Employment Appeal Tribunal: the claimant's separate appeal against the substantive decision was dismissed at a rule 3(10) hearing.